The last few weeks in the UK energy industry have been turbulent, to say the least. With several energy companies going bust, record gas prices and fuel shortages, there has been plenty going on. Even within the last week, things have changed rapidly.
But what exactly is causing all of this chaos? What is the UK doing about the energy crisis? Is this just a short problem or will it last for a long time? These are questions many are asking.
This article will sum up all the events in the last week, keeping you updated and informed.
UK Energy Supplier Crisis
With three more energy suppliers collapsing this week, over 230,000 customers will be transferred to E.ON. This move is under plans that have been agreed by the industry watchdog, due to rising wholesale electricity and gas prices. E.ON Next was appointed by Ofgem to take customers from the three failing suppliers:
- Enstroga
- Igloo Energy
- Symbio Energy
Soaring wholesale gas prices has continued to cause havoc in the energy industry, with warnings in place for consumers. It is predicted that many people will struggle to pay their bills this winter. Household energy costs are reaching record highs and customers will, unfortunately, have to try and keep up with them.
Ofgem announced that the affected customers had been transferred to E.ON Next through a competitive process. This is designed for the affected customers to get the best deal and making sure households supply would not be interrupted.
It should be noted that Ofgem has the “supplier of last resort” scheme, which we will cover below. Customers with smaller suppliers will likely be on cheaper fixed-rate tariffs, advertised by the challenger providers to entice more customers. Unfortunately, these customers will now see their bills soar to the government’s energy cap.
What Is The Supplier Of Last Resort Scheme?
When an energy company goes bust, Ofgem revokes their supply licence. They will then appoint a ‘supplier of last resort’ (SoLR). This supplier will take over the supply of gas and/or electricity to the bust supplier’s customers. The goal is for customers to have a seamless continuity of service.
Which Energy Suppliers Have Gone Bust This Year?
This year alone, 12 suppliers have gone bust. With over 1 million customers being affected by the rising wholesale gas prices, will this number increase before we reach 2022? Hopefully not, but only time will tell.
| Date | Failed supplier | Customers | Acquiring supplier |
| September 2021 | Symbio | 50,000 | E.ON Next |
| September 2021 | Igloo | 180,000 | E.ON Next |
| September 2021 | Enstroga | 6,000 | E.ON Next |
| September 2021 | Avro | 600,000 | Octopus |
| September 2021 | Green | 350,000 | Shell |
| September 2021 | People’s Energy | 350,000 | British Gas |
| September 2021 | Utility Point | 200,000 | EDF |
| September 2021 | PFP Energy | 80,000 | British Gas |
| September 2021 | Moneyplus Energy | 9000 | British Gas |
| August 2021 | HUB Energy | 15,000 | Eon Next |
| January 2021 | Simplicity Energy | 50,000 | British Gas Evolve |
| January 2021 | Green Network Energy | 367,500 | EDF |
Source: https://www.standard.co.uk/esmoney/bust-energy-suppliers-b958705.html
Is The UK Still Aiming For 2035 Renewable Targets?
So much talk this week has been about the energy crisis in the UK, that the thought of renewable energy has been at the back of most people’s minds. However, we shouldn’t forget that climate change is a huge deal and we need to continue our efforts to be mindful of energy.
This week, UK Prime Minister Boris Johnson spoke about nuclear power and renewable. The aim is for UK electricity generation to be fossil fuel free by 2035, with nuclear power playing a huge part in this. The U.K. is planning to use nuclear power as a backup for renewables.
Boris Johnson said this shift to looking at nuclear power would be effective in decarbonising the UK, as well as lowering the impact of gas price fluctuations like we have seen in recent times.
In 2020, 43% of the UK’s electricity was generated from renewable sources, with more than half from the combination of renewables and nuclear. However, a huge proportion of generated electricity is from gas-fired power plants.
As of today, nuclear power plants provide roughly a sixth of the UK’s electricity and gas providing just under a third. With plans on decarbonising the electricity grid, nuclear is likely to stay.
The UK relies heavily on gas for both electricity and heating, as shown by the recent price soar, issuing warnings of a winter energy crisis. However, removing gas from electricity generation would help protect the UK from future price surges like we are seeing now.
Being reliant on our clean power generation will allow us to not depend on hydrocarbons coming from overseas, keeping costs down as well as committing to a greener future. But is this realistic and can the UK meet these targets? Fingers crossed.
Just recently, there was an announcement of the world’s longest undersea electricity cable between the UK and Norway beginning operation. This cable will transfer green power between Blyth in Northumberland and the Norwegian town of Kvilldal.
This incredible feat of engineering goes through fjords, mountains and across the North Sea, maximising renewable energy resources. This partnership with Norway will lower carbon emissions by 23 million tonnes by 2030.
Four other power cables are involved, running to Belgium, France and the Netherlands. By 2030, 90% of energy imported through this system will be from zero-carbon sources. Positive steps from Europe which is promising to see.
Energy Across Europe
This leads nicely onto Europe. This week, natural gas prices hit record highs, creating more pressure on Europe’s energy sector ahead of the upcoming winter.
The European benchmark for natural gas, Dutch TTF, was trading at roughly 118 euros per megawatt-hour (MWh). This is 19% higher on the day, setting an unwanted record high, having soared 400 per cent since the start of the year.
Looking at the United Kingdom, wholesale natural gas prices rose 14% to £2.79 per therm this week, as well as British wholesale gas for immediate delivery increasing by 23% to £2.50 per therm.
With a cold European winter and spring meaning supplies were depleted by the summer, Asia and other countries are emerging from Covid-19 lockdowns, playing a huge part in the rising costs.
Problems aren’t just in the UK, with France, Greece, Italy and Spain having to make decisions to limit the impact on households. France is fighting for the EU to become less dependent on importing gas from abroad, such as from Russia and Norway.
Will The Energy Crisis Last Until 2022?
Wholesale gas prices are estimated to last into 2022, with the UK being vulnerable to the soar in global prices. Prices have seen a five-time increase, with this expected to continue until at least spring next year.
The average of reserves over the last 5 years is 88 per cent, however, current levels are at 72 per cent. There are numerous factors all culminating to impact these levels, with production problems at North Sea gas producers adding to existing issues.
The gas shortage cannot be filled by coal either, with prices rising by 78 per cent due to a delay in China upping mining activity and higher exports. China is also facing a crisis of their own. Activity has lowered following restrictions on energy use, as well as blackouts being reported in the world’s second-largest economy.
Other powerhouses such as India are facing problems of their own. India is heavily reliant on coal, however, low inventories of fossil fuel isn’t an ideal situation.
Globally, many countries are having troublesome times, but the UK is facing one of the toughest tests, as economists are labelling the UK as being more vulnerable than other countries. Many factors are contributing to this.
The 2017 closure of the Centrica-owned Rough site, the UK’s largest gas storage facility has added to the current challenges. Exports of gas have dropped by over 76 per cent in the three months to June, as well as net imports to the UK more than doubling during the same three-month period.
In the United States, there is a serious lack of capacity at its terminals to ship as much liquid natural gas to meet the high demands from Asia and Europe. Recent serious weather events haven’t helped the situation and have led to disrupted production at US sites.
Ovo Energy Making An Offer For Energy Rival Bulb?
This week, Ovo Energy looked to make a takeover offer for rival energy firm Bulb. The takeover would make Ovo Energy the second-largest supplier in Britain. Almost two years ago, Ovo Energy made a similar move after acquiring SSE’s retail customer base.
Mitsubishi, the largest shareholder of Ovo Energy has backed the move and the deadline is set for Wednesday. The deal would see Ovo Energy move up to second place, behind Centrica’s British Gas with the addition of 1.7 million customers from Bulb.
Octopus Energy has been linked with a move for Bulb, however, they are yet to make a formal offer. With the recent crisis in the UK energy market, companies have been falling, with Avro Energy being taken on by Octopus Energy in the last month.